OVERVIEW OF OUR PERFORMANCE, OPERATING ENVIRONMENT, STRATEGY AND OUTLOOK

References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign exchange rate changes are part of our business, they are not within our control and since they can mask positive or negative trends in the business, we believe presenting operational variances excluding these foreign exchange changes provides useful information to evaluate our results.

Our Business and Strategy

We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development, manufacture, marketing, sale and distribution of biopharmaceutical products worldwide. At the beginning of our fiscal fourth quarter of 2021, we reorganized our commercial operations and began to manage our commercial operations through a new global structure consisting of two operating segments: Biopharma and PC1. Biopharma is the only reportable segment. See Note 1A. We expect to incur costs of approximately $700 million in connection with separating Upjohn, of which, approximately 80% has been incurred since inception and through the first quarter of 2022. These charges include costs and expenses related to separation of legal entities and transaction costs.

For additional information about our business, strategy and operating environment, see the Item 1. Business section and Overview of Our Performance, Operating Environment, Strategy and Outlook section within MD&A of our 2021 Form 10-K.

Our Business Development Initiatives

We are committed to strategically capitalizing on growth opportunities, primarily by advancing our own product pipeline and maximizing the value of our existing products, but also through various business development activities.

Our significant recent business development activities include the transactions discussed in Note 2 and the following:

Acquisition of Biohaven--In May 2022, we and Biohaven announced that the companies entered into an agreement under which we will acquire Biohaven, the maker of Nurtec® ODT (rimegepant), an innovative dual-acting migraine therapy approved for both acute treatment and episodic prevention of migraine in adults. Under the terms of the agreement, we will acquire all outstanding common shares of Biohaven not already owned by us for $148.50 per share, in cash. The proposed transaction includes the acquisition of Biohaven's CGRP programs, including rimegepant, zavegepant and a portfolio of five pre-clinical CGRP assets. Biohaven common shareholders, including Pfizer, will also receive 0.5 of a share of New Biohaven, a new publicly traded company that will retain Biohaven's non-CGRP development stage pipeline compounds, per Biohaven common share. Pfizer will pay transaction consideration totaling approximately $11.6 billion in cash. Pfizer will also make payments at closing to settle Biohaven's third party debt and for the redemption of all outstanding shares of Biohaven's redeemable preferred stock.

This agreement follows on the November 2021 collaboration for the commercialization of rimegepant and zavegepant outside the U.S., in connection with which Pfizer acquired 2.6% of Biohaven's common stock. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of rimegepant and zavegepant in the U.S. in excess of $5.25 billion. The proposed transaction is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions, including receipt of regulatory approvals and approval by Biohaven's shareholders. The companies expect the transaction to close by early 2023.

Acquisition of ReViral--In April 2022, we and ReViral announced that the companies entered into an agreement under which we will acquire ReViral, a privately held, clinical-stage biopharmaceutical company focused on discovering, developing and commercializing novel antiviral therapeutics that target respiratory syncytial virus. Under the terms of the agreement, we will acquire ReViral for a total consideration of up to $525 million, including upfront and development milestones, subject to customary closing conditions, including receipt of regulatory approvals.

For a description of the more significant recent transactions through February 24, 2022, the filing date of our 2021 Form 10-K, see Note 2 in our 2021 Form 10-K.

Our First Quarter 2022 Performance

Revenues--Revenues increased $11.1 billion, or 77%, in the first quarter of 2022 to $25.7 billion from $14.5 billion in the first quarter of 2021, reflecting an operational increase of $11.9 billion, or 82%, as well as an unfavorable impact of foreign exchange of $778 million, or 5%. Excluding direct sales and alliance revenues of Comirnaty and sales of Paxlovid, revenues increased 2% operationally, reflecting strong growth in the Prevnar family in the U.S., Eliquis, Vyndaqel/Vyndamax, Oncology biosimilars and Ibrance internationally, partially offset by declines in Chantix/Champix, Xeljanz and Ibrance in the U.S.


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Revenues in the first quarter of 2022 were unfavorably impacted by approximately $200 million as a result of the first quarter of 2022 having one fewer selling day in the U.S. and one fewer selling day in international markets as compared to the first quarter of 2021. This unfavorable impact is expected to reverse in the fourth quarter of 2022.

See the Analysis of the Condensed Consolidated Statements of Income--Revenues by Geography and Revenues--Selected Product Discussion sections for more information, including a discussion of key drivers of our revenue performance. For information regarding the primary indications or class of certain products, see Note 13C.

Income from Continuing Operations Before Provision/(Benefit) for Taxes on Income--The increase in Income from continuing operations before provision/(benefit) for taxes on income of $3.4 billion in the first quarter of 2022, compared to the same period in 2021, was primarily attributable to higher revenues, partially offset by an increase in Cost of sales, net losses on equity securities in the first quarter of 2022 versus net gains on equity securities in the first quarter of 2021, and increases in Acquired in-process research and development expenses and Research and development expenses.

See the Analysis of the Condensed Consolidated Statements of Income within MD&A and Note 4 for additional information.

For information on our tax provision and effective tax rate, see the Provision/(Benefit) for Taxes on Income section within MD&A and Note 5.

Our Operating Environment

We, like other businesses in our industry, are subject to certain industry-specific challenges. These include, among others, the topics listed below, as well as in the Item 1. Business--Government Regulation and Price Constraints and Item 1A. Risk Factors sections, and the Overview of Our Performance, Operating Environment, Strategy and Outlook--Our Operating Environment section of the MD&A of our 2021 Form 10-K.

Intellectual Property Rights and Collaboration/Licensing Rights--The loss, expiration or invalidation of intellectual property rights, patent litigation settlements with manufacturers and the expiration of co-promotion and licensing rights can have a material adverse effect on our revenues. Certain of our products have experienced patent-based expirations or loss of regulatory exclusivity in certain markets in the last few years, and we expect certain products to face increased generic competition over the next few years. While additional patent expiries will continue, we expect a moderate impact of reduced revenues due to patent expiries from 2022 through 2025. We continue to vigorously defend our patent rights against infringement, and we will continue to support efforts that strengthen worldwide recognition of patent rights while taking necessary steps to help ensure appropriate patient access.

For additional information on patent rights we consider most significant in relation to our business as a whole, see the Item 1. Business--Patents and Other Intellectual Property Rights section of our 2021 Form 10-K. For a discussion of recent developments with respect to patent litigation, see Note 12A1.

Regulatory Environment/Pricing and Access--Government and Other Payer Group Pressures--Governments globally, as well as private third-party payers in the U.S., may use a variety of measures to control costs, including, among others, proposing pricing reform or legislation, employing formularies to control costs, cross country collaboration and procurement, price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, "international reference pricing" (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. We anticipate that these and similar initiatives will continue to increase pricing pressures globally. For additional information, see the Item 1. Business--Pricing Pressures and Managed Care Organizations and --Government Regulation and Price Constraints sections in our 2021 Form 10-K and the Overview of Our Performance, Operating Environment, Strategy and Outlook--Our Operating Environment section of the MD&A in our 2021 Form 10-K.

Product Supply--We periodically encounter supply delays, disruptions and shortages, including due to voluntary product recalls. In response to requests from various regulatory authorities, manufacturers across the pharmaceutical industry, including Pfizer, are evaluating their product portfolios for the potential presence or formation of nitrosamines. This has led to recalls, including our voluntary recall of Chantix in 2021 and additional voluntary recalls initiated for other products in 2022 due to the presence of nitrosamines above the applicable acceptable intake limit, and may lead to additional recalls or other market actions for Pfizer products. For information on our Chantix recall in 2021 and risks related to product manufacturing, see the Item 1A. Risk Factors--Product Manufacturing, Sales and Marketing Risks section of our 2021 Form 10-K.

The Global Economic Environment

In addition to the industry-specific factors discussed above, we, like other businesses of our size and global extent of activities, are exposed to economic cycles. For additional information, see the Overview of Our Performance, Operating Environment, Strategy and Outlook--The Global Economic Environment section of the MD&A of our 2021 Form 10-K.



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Russia/Ukraine Conflict--Our global operations may be impacted by certain factors in the global economic environment including impacts of political or civil unrest or military action, including the conflict between Russia and Ukraine. To date, the financial impacts of the conflict have not been material to our consolidated financial statements. For both the fiscal year ended December 31, 2021 and the fiscal quarter ended April 3, 2022, the business of our Russia and Ukraine subsidiaries represented less than 1% of our consolidated revenues and assets. In March 2022, we announced certain steps we are taking in response to the conflict, which are being taken in addition to the company's adherence to global sanctions. Consistent with our commitment to putting patients first, we are maintaining the supply of medicines to Russia, including the provision of needed medicines to patients already enrolled in clinical trials. Effective March 14, 2022, Pfizer is donating all profits of our Russian subsidiary to causes that provide direct humanitarian support to the people of Ukraine, in addition to the company's ongoing efforts to support the humanitarian response in the region. Additionally, we will no longer initiate new clinical trials in Russia, will stop recruiting new patients in our ongoing clinical trials in the country, and will cease all future investments with local suppliers intended to build manufacturing capacity in Russia. While we are monitoring the effects of the armed conflict between Russia and Ukraine, the broader economic consequences of the conflict, including its potential future impact on our business, are currently difficult to predict. Regional instability, geopolitical shifts, potential additional sanctions and other restrictive measures against Russia, neighboring countries or allies of Russia, and any retaliatory measures taken by Russia, neighboring countries or allies of Russia, in response to such measures could adversely affect the global macroeconomic environment, our operations, currency exchange rates and financial markets, which could in turn adversely impact our business.

COVID-19 Pandemic--The COVID-19 pandemic has impacted our business, operations and financial condition and results.

Our Response to COVID-19

Pfizer has helped lead the global effort to confront the COVID-19 pandemic by advancing a vision for industry-wide collaboration while making significant investments in breakthrough science and global manufacturing.

•Comirnaty/BNT162b2:

•We have collaborated with BioNTech to jointly develop Comirnaty/BNT162b2, a mRNA-based coronavirus vaccine to help prevent COVID-19. For additional information, see the Product Developments section of this MD&A. We continue to evaluate our vaccine, including for additional pediatric indications, and the short- and long-term efficacy of Comirnaty. We are also studying vaccine candidates to potentially prevent COVID-19 caused by new and emerging variants or an updated vaccine as needed. •The companies have entered into agreements to supply pre-specified doses of Comirnaty in 2022 with multiple developed and emerging countries around the world and are continuing to deliver doses of Comirnaty to governments under such agreements. We also signed agreements with multiple countries to supply Comirnaty doses in 2023 and are currently negotiating similar potential agreements with multiple other countries. We anticipate delivering at least two billion doses to low- and middle-income countries by the end of 2022-one billion that was delivered in 2021 and one billion expected to be delivered in 2022, with the possibility to increase those deliveries if more orders are placed by these countries for 2022. One billion of the aforementioned doses to low- and middle-income countries are being supplied to the U.S. government at a not-for-profit price to be donated to the world's poorest nations at no charge to those countries.

•As of May 3, 2022, we forecasted approximately $32 billion in revenues for Comirnaty in 2022, with gross profit to be split evenly with BioNTech, which includes doses expected to be delivered in fiscal 2022 under contracts signed as of mid-April 2022.

•Paxlovid:

•In December 2021, the FDA authorized the emergency use of Paxlovid, a novel oral COVID-19 treatment, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg [88 lbs]) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death. Paxlovid has been granted an authorization or approval in many other countries. For additional information, see the Product Developments section of this MD&A.

•We continue to evaluate Paxlovid in other populations, including in patients with a confirmed diagnosis of SARS-CoV-2 infection who are at standard risk (i.e., low risk of hospitalization or death) (Phase 2/3 EPIC-SR (Evaluation of Protease Inhibition for COVID-19 in Standard Risk Patients)) and in non-hospitalized, symptomatic, pediatric patients with a confirmed diagnosis of COVID-19 who are at risk of progression to severe disease (Phase 2/3 study, EPIC-PEDS (Evaluation of Protease Inhibition for COVID-19 in Pediatric Patients)). In April 2022, Pfizer announced that the primary endpoint of reducing the risk of confirmed and symptomatic COVID-19 infection in adults who had been exposed to the virus through a household contact was not met in the Phase 2/3 EPIC-PEP (Evaluation of Protease Inhibition for COVID-19 in Post-Exposure Prophylaxis) study.

•We have entered into agreements with multiple countries to supply pre-specified courses of Paxlovid, such as the U.S. and U.K. Additionally, we have signed a voluntary non-exclusive license agreement with the Medicines Patent Pool (MPP) to



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share intellectual property related to our oral COVID-19 treatment to enable qualified generic medicine manufacturers worldwide to manufacture and supply generic versions of this treatment to 95 low- and middle-income countries, pending authorization or approval, covering up to approximately 53% of the world's population. MPP has entered into sublicense agreements with 36 generic manufacturers. In addition, in March 2022, Pfizer entered into an agreement with UNICEF to supply up to 4 million treatment courses of Paxlovid to 95 low- and middle-income countries, pending authorization or approval.

•Pfizer has capacity to manufacture up to 120 million treatment courses by the end of 2022 (and is on track to produce 30 million courses in the first half of 2022 with the ability to produce the remaining 90 million courses in the second half of 2022), depending on the global need, which will be driven by purchase agreements.

•As of May 3, 2022, we forecasted approximately $22 billion of revenues for Paxlovid in 2022, which includes treatment courses expected to be delivered in fiscal 2022, primarily relating to supply contracts signed or committed as of mid-April 2022.

Impact of COVID-19 on Our Business and Operations

As part of our on-going monitoring and assessment, we have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration, severity and the global macroeconomic impact of the pandemic, as well as COVID-19 vaccine and oral COVID-19 treatment revenues, supply and contracts, which remain dynamic. Despite careful tracking and planning, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition and results due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible, including by using digital technology to assist in operations for our commercial, manufacturing, R&D and corporate enabling functions globally.

As discussed in our 2021 Form 10-K, apart from our introduction of Comirnaty/BNT162b2 and Paxlovid, our business and operations were impacted by the pandemic in various ways; certain of those impacts have continued in 2022. For additional detail and discussion on the impact of the COVID-19 pandemic on certain of our products, sales and marketing, supply chain and clinical trials, see the Analysis of the Condensed Consolidated Statements of Income-Revenues by Geography and Revenues-Selected Product Discussion sections within this MD&A and the Overview of Our Performance, Operating Environment, Strategy and Outlook-The Global Economic Environment-COVID-19 Pandemic section of the MD&A of our 2021 Form 10-K.

We will continue to pursue efforts to maintain the continuity of our operations while monitoring for new developments related to the pandemic. Future developments could result in additional favorable or unfavorable impacts on our business, operations or financial condition and results. If we experience significant disruption in our manufacturing or supply chains or significant disruptions in clinical trials or other operations, if demand for our products is significantly reduced as a result of the COVID-19 pandemic, or if demand for our COVID-19 vaccine or oral COVID-19 treatment is reduced or no longer exists, we could experience a material adverse impact on our business, operations and financial condition and results.

For additional information, see the Item 1A. Risk Factors-COVID-19 Pandemic section and the Overview of Our Performance, Operating Environment, Strategy and Outlook section of the MD&A of our 2021 Form 10-K.

SIGNIFICANT ACCOUNTING POLICIES AND APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

For a description of our significant accounting policies, see Note 1 in our 2021 Form 10-K. Of these policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of the most subjective and the most complex judgments: Acquisitions (Note 1E); Fair Value (Note 1F); Revenues (Note 1H); Asset Impairments (Note 1M); Tax Assets and Liabilities and Income Tax Contingencies (Note 1Q); Pension and Postretirement Benefit Plans (Note 1R); and Legal and Environmental Contingencies (Note 1S).

For a discussion about the critical accounting estimates and assumptions impacting our consolidated financial statements, see the Significant Accounting Policies and Application of Critical Accounting Estimates and Assumptions section within MD&A in our 2021 Form 10-K. See also Note 1D in our 2021 Form 10-K for a discussion about the risks associated with estimates and assumptions.

For a discussion of a recently adopted accounting standard, see Note 1B. For a discussion of presentation changes for Acquired in-process research and development expenses, see Note 1D.



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